1 Product Liability LPP 255 Pat Cihon Syracuse University -- SoM -- LPP

2 Overview u Sellers’ or Manufacturers’ Liability for products made or sold by them u Politically Controversial u Concern over “Litigation Explosion” -- McDonald’s Coffee Suit

3 Agenda u Contract-Based and Tort-Based Theories u Requirements and Details of Theories u Damages Available under Each Theory

4 CONTRACT-BASED THEORIES u Express Warranty u Implied Warranty of Merchantability u Implied Warranty of Fitness of Purpose

5 EXPRESS WARRANTY u Art of Uniform Commercial Code u Requirements:  Any Affirmation of Fact or Description of Product;  Providing Model or Sample of Product  “Basis of the Bargain” u Becomes Promise or Warranty that Product meets Description, Model or Sample

6 IMPLIED WARRANTY OF MERCHANTABILITY u Article of Uniform Commercial Code u Requirements:  Merchant: Ordinary Business of Selling Products  Product Sold in Course of Business u Promise Implied by Law that Product Will Meet Normal Consumer Expectations or Pass Under Trade Description

7 IMPLIED WARRANTY OF FITNESS OF PURPOSE u Article of Uniform Commercial Code u Requirements:  Consumer Makes Retailer Aware of Purpose For Seeking Product  Retailer Recommends Product For Purpose  Consumer Relies on Recommendation to Purchase Product u Promise Implied by Law that Product Will Be Fit For Purpose of Consumer

8 TORT-BASED THEORIES u Negligence u Strict Liability

9 NEGLIGENCE u Requirements:  Duty of Care Owed by Seller / Manufacturer  Seller / Manufacturer Breaches Std. of Care  Injury or Damages Suffered  Breach of Std. of Care was Proximate Cause u Seller or Manufacturer at Fault for Failing to Exercise Reasonable Care In Making / Selling Product

10 STRICT LIABILITY u Section 402A of Restatement of Torts u Requirements:  Product Sold in Ordinary Course of Business  Product Has Condition that Poses Unreasonable Danger to Consumer  Condition Existed When Product Left Manufacturer  Condition Causes Injury or Damage u Seller and Manufacturer Liable for Injuries Caused by Product -- No Fault Liability

11 TYPES OF DAMAGES u Economic Damages - Contract Theories  Direct Economic Damages - Basis of Bargain  Indirect Economic Damages - Lost Profits u Personal Injury Damages-Tort & Contract  Medical Injuries  Property Damage u Punitive Damages - Tort Theories Only

12 Disclaimers and Remedy Limitations u Disclaimer -- Attempt to Avoid Liability Under Particular Theory  Must Be Reasonable -- Allow Consumer Some Remedy  Only Implied Warranties Disclaimed in Consumer Setting u Remedy Limitation -- Attempt to Limit Liability for Types of Damages  Only if Reasonable  Consumer Clearly Aware of Limitation